Builder’s gross negligence ends in $20.8 million award

The price of unconscionable conduct

A Texas homeowner was awarded $20.8 million in a lawsuit against Bishop Abbey Homes Ltd. and the owner of the company. In the suit, the homeowner stated that the defendants reneged on their promise to repair structural damages caused by foundation defects on the home site they were aware of prior to the start of construction.

The jury found the defendants liable for “false, misleading, or deceptive act or practice” which included violations of the Texas Deceptive Trade Practices Act and gross negligence. The $20.8 million verdict included the cost of repairs, lost market value, attorneys’ fees, and punitive damages.

Proving gross negligence is often difficult in Texas courts, according Van Shaw, attorney for the plaintiff. Shaw stated that he hopes the verdict in the case sends a clear message to other builders that contracts and warranties are not to be ignored.

Absent a specific exclusion, most contractor General Liability policies cover punitive damages unless prohibited by the jurisdiction. However, many General Liability policies have an exclusion for soil movement and construction defect. In addition, unfair trade practices by itself is not typically covered under a General Liability policy unless accompanied by a negligence-based cause of action, which was the case in this lawsuit. Builders must not assume that all types of lawsuits are covered and should request a thorough review of what is covered and what is not from their insurance agent. Sadler Contractor Insurance will gladly discuss these coverage issues with our clients or prospects.